Going Dutch on eDiscovery: Hosted Review Agreement Trumps Prevailing Party Cost-Shifting

In a patent dispute, the parties agreed to use a online review platform for the production of email and to share the costs.  The prevailing party in the lawsuit won on having their hosting costs of $234,702.43 shifted to the opposing party.  The losing party appealed and the Court of Appeals reversed the cost-shifting award. Synopsys, Inc. v. Ricoh Co. (In re Ricoh Co.), 2011 U.S. App. LEXIS 23495, 9-12 (Fed. Cir. Nov. 23, 2011).

The use of the online review database was born out of a production dispute.  The Producing Party initially proposed producing email messages as 1) a hard copy production of the e-mails; 2) converting them to TIFF format, or 3) loading them onto a local terminal at its offices and allowing the Requesting Party counsel to review them on site only. In re Ricoh Co., at *5.

The Requesting Party [very rightly] objected to the Producing Party’s form of production proposals and sought the email produced in native file format.  In re Ricoh Co., at *5.

The Requesting Party recommended a hosted review provider and to divide the hosting costs between the litigants.  In re Ricoh Co., at *5-6.

After the conclusion of the lawsuit, the Producing Party argued that because the hosted review platform was used for the email production, the full hosting costs were taxable.  In re Ricoh Co., at *6.

The Court agreed that the use of the online review platform was taxable under 28 U.S.C. 1920(4), because the “database was used as a means of document production in this case.” In re Ricoh Co., at *7.

However, there was a very BIG however: the joint contract with the hosted service provider that contained a cost-sharing provision.

The Court cited to a case from 1975, which held that it was “proper” to “exclude from costs awarded certain charges because ‘[t]he parties had agreed to share the expense for [that] service.'” In re Ricoh Co., at *10, citing Thomas v. Duralite Co., 524 F.2d 577, 590 (3d Cir. 1975).

The Court of Appeals zeroed in on the 14-page joint hosting contract that included a cost-sharing agreement between the parties.  In re Ricoh Co., at *11.  As the Court of Appeals stated:

The parties characterized this agreement as a cost-sharing agreement, but never indicated that the cost-sharing was only temporary. Communications between the parties after the agreement with Stratify was executed continued to reflect the cost-sharing agreement.

There is no indication in any of the extensive communications between the parties that they intended this cost-sharing agreement to be anything other than a final settlement of the cost of the Stratify database.

 If the cost-sharing agreement were designed to be only an interim agreement, it seems likely that there would have been some indication to that effect in either the communications between counsel or the agreement with Stratify. Under these circumstances, the parties’ agreement is best interpreted as agreeing to a final, not an interim, sharing of costs.

In re Ricoh Co., at *11-12.

The Court held the hosting agreement was controlling and reversed the award of $234,702.43 for hosting costs.

Bow Tie Thoughts

It is good that courts recognize hosting fees for an online review platform as recoverable costs.  This opinion puts parties and service providers on notice to watch out for the terms in a shared hosting agreement.  If there is a possibility a party may seek costs for a shared hosted review database, a clause should be put into the agreement about cost-shifting for a prevailing party.  This should be a Rule 26(f) meet and confer topic if a shared-hosting platform is being considered.

Online review databases have many benefits.  In large multi-party lawsuits, the volume of ESI to review is often too large for a law firm to maintain.  Having the data hosted by a third-party allows the law firm to focus on the subject matter of the case, opposed to investing in both the hardware, software and expertise to effectively set-up the discovery for review.

Large law firms are not the only ones using online review software.

Hosted solutions can also allow judges to have access to the discovery if the case so requires.  In El-Amin v. George Wash. Univ., 2008 U.S. Dist. LEXIS 85009 (D.D.C. Oct. 22, 2008), Judge Facciola ordered the parties to consider using a hosted review platform that could “easily used by counsel and by the Court.”  For more, see Court Orders For Hosted Review Solutions: When the Judge Wants to See the Discovery Too.

Highlighting the advantages of an online review platform, Access Data has been very gracious to host my high school mock trial team’s fictional case in Case Vantage.

The students are using Case Vantage to review the witness statements; identify facts supporting the causes of actions/defenses; recognize evidentiary issues; determine hearsay objections and the corresponding hearsay exceptions. Issue codes were created for the different charges against the fictional defendant based on the assigned jury instructions.

The students are also posting outlines of their pre-trial arguments, opening statements, closing arguments, and witness examinations for me to review online.

Whether an online review platform is being used in a complex case subject to a protective order or by high school students learning how to build a case, there are many advantages to using online hosted review.

One thought on “Going Dutch on eDiscovery: Hosted Review Agreement Trumps Prevailing Party Cost-Shifting

  1. Another very interesting part of this opinion: The court also disallowed $322,000 in e-discovery costs to the prevailing party, remanding to the district court for inadequate documentation. Neither party is precluded from providing this documentation. However… the prevailing party’s first counsel — the one that conducted discovery, and presumably had all the invoices — dissolved in March. It appears it will be very difficult for the prevailing party to supplement what they’ve already provided in their bill of costs. This is somewhat speculative, of course, but it could be out another $300k for not keeping thorough tabs on its records.

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